Ojsc Tnk-BP Holding & Anor v Lazurenko

TNK-BP Group is a leading Russian oil company. It was formed in 2003 in consequence of the merger of the oil and gas interests in Russia of BP with those of the Alfa, Access and Renova group. The claimants (TNK-BP) are respectively the holding and management companies within the group. The defendant, Mr Lazurenko, has been employed by the second claimant on the terms of an employment contract made between them on 1st September 2003, until January 2010 as head of logistics and thereafter, until 27th April 2012, as head of the Department of New Business, Development and Processing. The contract (“Employment Contract”) contains two material provisions, namely:

1.

“During and after termination of the employment a Manager shall keep in strict secrecy and confidence all matters and/or documents, which he may be aware of, regarding the affairs, interests or operations of the Company or any of its employees, clients or any other persons or business contacts, connected with the Company, and will not disclose such matters or documents, unless properly authorised to do so by the Company, and will not use them for personal purposes or on behalf of third parties;” (clause 2.1.7)

2.

“If the parties are unable to settle disputes or differences between them by means of direct negotiations, such disputes or differences shall be resolved in Russian courts of common jurisdiction in accordance with the laws of the Russian Federation.” (clause 7.1)

In March 2012 Mr German Khan, the executive director of the second claimant, instituted an internal inquiry into the propriety of the alleged receipt of substantial sums by Mr Lazurenko in the course of his employment. Mr Lazurenko sought and was granted unpaid leave. He left his office on 26th March 2012 and submitted his resignation to Mr Khan by letter dated 27th April 2012. Proceedings (“the Fraud Claim”) to recover the allegedly corrupt receipts from Mr Lazurenko and others were instituted by TNK-BP in England on 6th August 2012.

In the meantime, on 26th June 2012, Mr Lazurenko met Mr Egorov, the Vice-President, Legal Affairs of the second claimant, and Mr Maydannik, the Chief Legal Officer, Executive Vice-President for Legal Support of the second claimant, in the offices in London of his solicitors, Mishcon de Reya. There, in circumstances of the strictest security and confidence, Mr Lazurenko showed to Mr Maydannik the contents of 2 A4 Files (“the Documents”). Each file contained a draft statement of Mr Lazurenko followed by the papers relating to that statement. The first file covered events occurring in 2003/04, the second with relations between TNK-BP and a number of other organisations including Skilton, Hawar, Divers Reinsures, Eastonberry and OilMax. Mr Maydannik correctly understood that Mr Lazurenko considered that these documents “would be damaging to TNK-BP if disclosed because they purport to reveal high-level personnel engaging in corrupt behaviour”.

On 10th July 2012 TNK-BP applied to Roth J, sitting in private, for an interim without notice injunction restraining Mr Lazurenko until 17th July 2012 or further order from disclosing the Documents or any of them. The application was made on the basis of witness statements from Mr Egorov and the solicitor for TNK-BP, Mr Dougans. The latter exhibited a witness statement of Mr Maydannik. Roth J duly made the order sought. The claim form in this action (“the Documents Claim”) was issued the same day. The particulars of claim served on 17th August 2012 allege, so far as material, as follows:

“6.

The Defendant’s employment with the Second Claimant was governed by a written contract of employment dated 1 September 2003 which contained the following express provision:

“2.1.7.

During and after termination of the employment [the Defendant] shall keep in strict secrecy and confidence all matters and/or documents, which he may be aware of, regarding the affairs, interests or operations of the Company or any of its employees, clients or any other persons or business contacts, connected with the Company, and will not disclose such matters or documents, unless properly authorised to do so by the Company, and will not use them for personal purposes or on behalf of third parties.”

7.

The Defendant’s employment with the Second Claimant gave rise to a further implied duty to keep confidential the Claimants’ confidential information.

8.

Further and alternatively the Defendant owed and owes to the Claimants an equitable duty of confidence in respect of information which:

8.1

has come into his possession in consequence of his employment with the Second Claimant; and/or which

8.2

he knows or ought to know is confidential to the Claimants.

9.

The Defendant’s duties set out hereinabove include the following:

9.1

a duty not to disclose the Claimants’ confidential information;

9.2

a duty not to make personal or other improper use of any such information;

9.3

a duty to deliver up to the Second Claimant any of the Claimants’ confidential information immediately upon termination of the Defendant’s employment; and

9.4

a duty to account to the Claimants for any use made by the Defendant of any relevant confidential information.

10.

As the Defendant knew or ought to have known, the following categories of information, amongst others, are and were confidential to the Claimants:

10.1

the terms upon which TNK-BP contracted with third parties for the provision of services;

10.2

the terms upon which TNK-BP negotiated the purchase of shares in third party companies;

10.3

details of the bank accounts used by TNK-BP, its subsidiaries and its commercial counterparts;

10.4

personal data relating to employees and/or contractors of TNK-BP, its subsidiaries and its commercial counterparts;

10.5

TNK-BP’s due diligence reports; and

10.6

boilerplate clauses belonging to the Claimants.”

On the return date, 17th July 2012, TNK-BP sought from Vos J the continuation of the order made by Roth J and an additional order for delivery up of the Documents. The applications were adjourned until 24th July 2012. On the former date Vos J varied the order made by Roth J so as to permit disclosure of the Documents to law enforcement agencies in the UK, US or Russia. Copies of the Documents were duly supplied to the solicitors for TNK-BP on 31st July 2012. On 29th August 2012 Mr Dougans made a further witness statement for TNK-BP. He expressed the view, on the instructions of Mr Egorov, that the Documents did not contain prima facie evidence of any wrong-doing but that their disclosure “may prove damaging” to TNK-BP.

On 14th September 2012 Mr Lazurenko issued an application for a declaration pursuant to CPR 11(1) that the court has no jurisdiction or should not exercise any jurisdiction it might have over him and for orders to set aside service of the claim on him and the orders of Roth and Vos JJ. That application is supported by a witness statement of Mr Lazurenko. He asserts in paragraph 3 that:

“The Documents contain the details of wrongdoing between TNK-BP and companies beneficially owned and controlled by the most senior officers of Transneft and officials of the Ministry of Energy responsible for regulating and monitoring the oil industry in Russia.”

In subsequent paragraphs he elaborates on that allegation in considerable detail. In paragraph 125 he denies that any of the Documents contains any information of any possible commercial use to a third party or of any detriment to TNK-BP. Although TNK-BP filed a good deal of evidence in reply no one, with actual knowledge of the facts, denied the detailed allegations made by Mr Lazurenko.

In those circumstances the issues for my determination in logical, as opposed to chronological, order, are (1) whether to accede to the application of Mr Lazurenko; and if not (2) whether to continue the orders made by Roth and Vos JJ. In order to deal with either of them it is essential first to ascertain which system of law, Russian or English, is the applicable law to the claims made in this action and, if Russian, what are the relevant principles to be applied.

I have already set out the terms of paragraphs 6 to 10 of the Particulars of Claim. Paragraphs 11 to 16 contain allegations of the alleged threatened misuse of the confidential information on which TNK-BP relies. In paragraphs 11.1 and 12 it is alleged that a Russian lawyer acting for Mr Lazarenko asserted that unless TNK-BP ceased to prosecute the Fraud Claim, amongst others, against Mr Lazarenko he, Mr Lazurenko, would disclose the Documents to third parties, including the press and/or sell them to a competitor of TNK-BP. In paragraph 15 it is alleged that Mr Lazarenko intended by this means to put pressure on TNK-BP to settle the proceedings against him. But the claim is clearly based on the duties of confidence alleged in paragraphs 6, 7 and 8. Thus paragraph 17 asserts:

“17.

In the circumstances the Defendant is in breach his duties of confidence to the Claimants, as specified in paragraphs 6, 7 and 8 above, by:

17.1

retaining the Confidential Information following the termination of his employment with the Second Claimant, and failing to account for it to the Claimants, deliver it up and/or destroy it;

17.2

making personal use of the Confidential Information by improperly attempting to use it to affect the outcome of the Associated Proceedings; and

17.3

threatening to disclose the Confidential Information to third parties, including the Press and Mr Nekrich.”

It was common ground that clause 7 of the Employment Contract was a sufficient choice of Russian law for the purposes of Article 3.1 of Rome I as applied in the United Kingdom by the Contracts (Applicable Law) Act 1990. In any event Article 6 necessitates the application of the laws of Russia as that is the country in which Mr Lazurenko habitually carried out his work in performance of the Employment Contract. Article 10.1 thereof provides:

“The law applicable to a contract by virtue of Articles 3 to 6 and 12 of this Convention shall govern in particular:

(a)

interpretation;

(b)

performance;

(c)

within the limits of the powers conferred on the court by its procedural law, the consequences of breach, including the assessment of damages in so far as it is governed by rules of law;

(d)

the various ways of extinguishing obligations, and prescription and limitation of actions;

(e)

the consequences of nullity of the contract.”

Although paragraph 8 of the Particulars of Claim alleges a duty of confidence arising in equity, counsel for TNK-BP did not suggest that it was to be treated in any way differently to the express or implied duties of confidence arising from the Employment Contract as alleged in paragraphs 6 and 7. In my view he was right not to do so. Either the duty arising in equity is so closely linked to the Employment Contract as to be regarded as a contractual obligation for the purposes of Rome 1, see Dicey and Morris 14th Ed. Vol. 2 para 32-022, or it is a non-contractual obligation to which Rome II applies in accordance with the Law applicable to Non-Contractual Obligations (England and Wales and Northern Ireland) Regulations 2008 (SI 2008/2986). In accordance with Article 4, the law to be applied is that of the Russian Federation. So far as relevant Article 15 thereof provides:

“Scope of the law applicable

The law applicable to non-contractual obligations under this Regulation shall govern in particular:

(a)

the basis and extent of liability, including the determination of persons who may be held liable for acts performed by them;

[(b)…];

(c)

the existence, the nature and the assessment of damage or the remedy claimed;

(d)

within the limits of powers conferred on the court by its procedural law, the measures which a court may take to prevent or terminate injury or damage or to ensure the provision of compensation;

[(e)-(h)]”

Thus the law to be applied is that of Russia both in relation to the scope of the obligation and, it would appear, the remedies available for its breach. The evidence in reply of TNK-BP included the sixth witness statement of Mr Dougans made on 4th October 2012 to which was exhibited an expert report of Mr Rozenberg on the relevant provisions of Russian law. Mr Rozenberg is a qualified Russian lawyer of thirty years standing. He has given a substantial expert’s report in the Fraud Claim. The report exhibited to Mr Dougans 6th witness statement is a good deal less formal in that it is neither dated nor signed. No objection was taken to its form and I accept it as stating the opinion of Mr Rozenberg as an expert on the Russian law relevant to this application.

Mr Rozenberg starts by setting out the question he was asked in these terms:

“Would Mr Rozenberg see this case as a Labour Law case, or any other such case where the Russian Courts would see themselves as having exclusive jurisdiction, or would he rather see it as falling outside the exclusive jurisdiction clause?”

Mr Rozenberg then sets out the terms of Article 57 of the Russian Federation’s Labour Code and notes that it is not any confidential information described in clause 2.1.7 of the Employment Contract which is protected by the law. In the case of commercial secret information, he continues:

“Its protection is governed by the RF Law “On commercial secret” and generally any confidential information may be protected under this law, provided however, that in relation to it, a person owing such information has undertaken particular protective measures defined in this Law.

Such measures include: determination of list of information containing commercial secret, restriction of access to this information, count of persons having access to such information, marking documents containing this information as protected etc.

In practical terms this means that an employer willing to protect certain confidential information vis-à-vis its employees has to adopt a special list of information comprising its commercial secret and grant access to this information to its employees under their personal signatures acknowledging that such information is protected as commercial secret (as expressly required under Article 11 of the RF Law “On commercial secret”).

Absent such a list formally adopted by Management and the said written acknowledgement by Mr Lazurenko, information to which he got access in the course of his employment with Management may not be considered as protected by commercial secret provisions and consequently as providing under Russian labour law grounds for liability of Mr Lazurenko in case of its unauthorized disclosure.

Based on the above, to advance a position under Russian labour law in relation to Mr Lazurenko’s statutory labour law duty to keep confidentiality of certain information which became known to him within the course of his employment, it is essential whether information listed in paragraph 10 of the Particulars of Claim was formally assigned a regime of protection as commercial secret by Management in relation to Mr Lazurenko.”

Mr Rozenberg then considers the remedies available to an employer. He states:

“Further, Russian labour law provides for two types of recourses for the unauthorized disclosure of the protected information by the employee: (i) termination of the labour contract under Article 81 of the RF Labour Law by the employer (which is irrelevant here given that Mr Lazurenko’s employment with Management has already terminated) and (ii) recovery of material damage inflicted to the employer by unauthorized disclosure of this information (the amount of such damage shall be substantiated by the claimant) under Article 243 of the RF Labour Code. No such recourse as to stop/prevent disclosure of the protected information or an order to destroy such documents is provided by Russian labour law.

At the same time, it is theoretically possible to seek judicial prohibition to the defendant to undertake particular actions in relation to protected information as an injunctive relief measure under Article 140 of the RF Civil Procedure Code (for example, in connection with a substantive claim for damages under Article 243 of the RF Labour Code), but we are unaware whether the Russian courts have ever granted any such injunction to secure the employer’s claim seeking compensation of damages caused by unauthorized disclosure by the employee of the protected information.

However, it must be emphasized that Russian labour law only provides for the recourse in case of unauthorized disclosure of protected information, not in case of a threat of unauthorized disclosure as in the present case and therefore it seems that obtaining the injunctive relief before the actual unauthorized disclosure takes place may prove unrealistic in Russian courts.”

Accordingly, it is clearly Mr Rozenberg’s view that under Russian law commercially confidential information may not be protected by a quia timet injunction, whether interim or final.

Mr Rozenberg concludes in response to the question he was asked:

“At the same time, in our view the dispute described in the Particulars of Claim seems to arise from the particular threat (blackmail) that Mr Lazurenko posed against Management and Holding having articulated it in London and having connected its realization with the conduct of the English court proceedings; based on these considerations, England shall be recognized as the place of commitment of the wrongdoing (and potentially of its consequences) on which the claim against the Defendant is based.

From this perspective, an effective recourse to prevent threatened disclosure of confidential information belonging to the Claimants (being reaction to the torturous action by Mr Lazurenko which took place in England) should take place in England in accordance with the English procedure and substantive norms.”

The validity of that conclusion is ultimately a question of the proper construction of the particulars of claim. That is an issue of English, not Russian law.

In response to the expert’s report of Mr Rozenberg adduced by TNK-BP, the solicitors for Mr Lazurenko obtained a report from Professor Maggs dated 7th October 2012. He is the Professor of Law specialising in Russian law at the University of Illinois College of Law. He was asked three questions. Only the first and third are relevant to what law is applicable. The first question and Professor Maggs answer to it are as follows:

“(1)

Do you generally agree with Rozenberg as to the requirements for information to be protected as a commercial secret? What are the implications for these proceedings?

10.

Yes, I generally agree with Mr. Rozenberg. In order for information to be confidential and protected, the holder of a commercial secret must take special steps to preserve confidentiality. Among other things, the holder must expressly identify the information comprising its commercial secrets, must mark documents containing such information as “Commercial Secret of [name of holder of the secret]”. If these precautions are not taken, confidentiality is lost. An employer that grants access to commercial secrets held by the employer itself or those to which the employer has access on behalf of contact partners must grant such access to employees under their personal signatures acknowledging that such information is protected as a commercial secret, and must keep records of those having access to such information. If the employer does not take these steps, neither the employer to its contract partners will have a trade secret violation claim against the employee.

11.

The Claimants cannot succeed with their claim if the Documents do not satisfy the Court that the Documents are marked and have been protected as described above. The burden is on the Claimants to establish this.”

The third question and answer are as follows:

“(3)

Does the Documents Claim fall outside the scope of the exclusive jurisdiction clause in Mr Lazurenko’s employment contract with Management?

The Documents Claim falls under the exclusive jurisdiction clause in favor of Russian courts in Article 7 of the Employment Contract. The present claim is brought to enforce the Employment Contract, and as such clearly falls within the scope of the exclusive jurisdiction clause. Mr Rozenberg is mistaken to say that a jurisdiction clause cannot or does not apply where what is alleged act is criminal. Indeed Article 243(5) lists “causing harm as the result of the criminal acts of an employee established by the verdict of a court” as a basis for imposing full material liability under the employment contract. Moreover, as I have said above, if the Documents disclose criminality then Mr. Lazurenko cannot have committed a crime by threatening to disclose them (or by in fact disclosing them).”

The expert evidence clearly establishes that, under Russian law, the provisions of clause 7.1 of the Employment Contract provide that the claims in respect of breaches of the duties alleged are to be determined by the relevant courts in Russia and in accordance with Russian law and the remedies available in Russian law do not include injunctions to restrain disclosure. That is the clear evidence of Professor Maggs. To the extent that Mr Rozenberg reaches a different conclusion it is based on his understanding of the particulars of claim. It is clear from paragraph 17 that the claim is based on a breach of the duty arising in the three ways alleged in paragraphs 6 to 8, not on any unlawful behaviour such as blackmail. It follows that the reservation made by Mr Rozenberg in the concluding passage of his opinion does not apply to this action.

The consequences of the need to apply Russian law go to the root of both applications. First, there is no evidence to suggest or pleading to aver that any of the Documents contain any information which is confidential so as to be protected under Russian law. Mr Rozenberg and Professor Maggs point to the necessity of TNK-BP having undertaken particular protective measures as respectively described by them. It has not been suggested in any of the voluminous witness statements filed by TNK-BP that any such measures were taken.

Counsel for TNK-BP suggested that the Employment Contract was sufficient; but it is clear from Mr Rozenberg’s reference to clause 2.1.7, referred to in paragraph 12 above that it was not. Counsel also relied on paragraph 11 of the first witness statement of Mr Egorov. There he referred to the procedures and policies of TNK-BP. He said:

“These procedures and polices are designed to protect TNK-BP, ensure proper financial and commercial controls as well as to prevent corruption. In particular, Mr Lazurenko would have been aware of the Corporate Standards of Information Security policy (the “Standard”), which establishes complex measures to protect information assets of TNK-BP from a wide range of threats. The Standard provides that:

“All information assts, lawfully created or acquired by Company employees in the course of operating business activities shall constitute Company property.

Company employees must return all Company information assets at their disposal upon expiry of the civil labour or other contract validity term. If an employee possesses knowledge which is of importance to the company business operations such information must be documented and handed over to the Company”.

There is no suggestion there of any express identification or acknowledgement of confidential information such as Professor Maggs and Mr Rozenberg regard as necessary.

Second, both experts make it clear that under Russian law no quia timet injunction, interim or final, to restrain a threatened disclosure of confidential information is available. Rome I Article 10.1 and Rome II Article 15 may have changed the common law position under which the availability of remedies was a matter for the lex fori. They appear to make the availability of remedies a matter for the lex causae. In this case that is Russian law. It would follow that TNK-BP has not demonstrated any cause of action or serious question to be tried in respect of its claim for an interim quia timet injunction. However, there is no authority to that effect, the issue was not fully argued before me and doubts have been expressed in Dicey and Morris para 32-203 and 19 Halsbury’s Laws 5th Ed para 646 note 9. Nevertheless, the doubt as to the availability of an injunction as a remedy shows that TNK-BP is unable to demonstrate a sufficient likelihood of success to satisfy the requirements of s.12(3) Human Rights Act 1998. For these reasons I will discharge the orders made by Roth and Vos JJ and dismiss the application of TNK-BP for their continuance.

If there is no cause of action then there is no jurisdiction to make any of the orders sought by TNK-BP. The appropriate remedy is not the relief sought by paragraphs 3(1) or (2) of the application notice issued by Mr Lazurenko but an order under CPR 3.4(2) or 24.2(a)(i) summarily striking out or dismissing the claim. I did not hear any submissions on whether I should make either of those orders but one or other of them would seem to follow from the submissions I did hear and my conclusion on them. If counsel wish to address me further on whether I should make either order and if so which I will hear further submissions when I hand down this judgment.

In these circumstances I have not found it necessary to refer to the submissions made to me on forum non conveniens, want of disclosure or whether or not I should continue the orders made by Roth and Vos JJ as a matter of discretion. For completeness I should record that I declined the invitation made by each counsel to go through the Documents. They sought respectively to demonstrate either that the Documents did nor did not disclose ‘iniquity’ or that they did or did not disclose information which could be considered to be commercially sensitive. It was clear from the witness statements that I could not, even if they arose, reach any concluded view on either issue so that the time taken to trawl through the documents would be wasted. It seems to me that, notwithstanding the invitations of counsel, the court should be astute to limit submissions to issues which can assist in resolving the dispute and avoid pursuing issues which cannot.

For all these reasons I will: